What Does Code C in Box 12 of Your W2 Mean?

A W2 form is an annual statement detailing an employee’s wages and taxes withheld, essential for filing individual income tax returns. Box 12 reports specific compensation, benefits, or deductions not directly included in the main taxable wages reported in Box 1.

What is Box 12 on Your W2

Box 12 on your W2 form is a designated area for reporting specific types of income, benefits, or contributions that have unique tax treatments. Unlike Box 1, which shows your total taxable wages, Box 12 uses alphabetic codes to identify different items. These items may or may not be taxable, but they are all relevant for tax purposes and provide a detailed breakdown of certain financial aspects of your employment.

Deciphering Code C

Code C in Box 12 of your W2 specifically represents the taxable cost of group-term life insurance coverage that exceeds $50,000. Group-term life insurance is a common benefit employers provide, offering a death benefit to employees’ beneficiaries. While the cost of the first $50,000 of such coverage provided by an employer is generally tax-free to the employee, any coverage beyond this amount is considered a taxable non-cash benefit. The Internal Revenue Service (IRS) mandates that the imputed cost of coverage exceeding $50,000 be included in the employee’s income.

This taxable amount is calculated not based on the actual premium paid by the employer, but using a standardized Uniform Premium Table (Table I) provided by the IRS. This table determines the monthly cost per $1,000 of insurance based on the employee’s age, and this calculated cost is added to the employee’s gross income. Consequently, this amount is included in Box 1 (Wages, tips, other compensation), Box 3 (Social Security wages), and Box 5 (Medicare wages and tips) on the W2, in addition to being separately reported in Box 12 with Code C.

How Code C Affects Your Taxes

The presence of Code C in Box 12 of your W2 indicates that the taxable cost of your group-term life insurance exceeding $50,000 has already been accounted for. This amount has already been included in your total taxable wages reported in Box 1, and consequently, it has been subjected to federal income tax withholding. Furthermore, it has been included in the wages subject to Social Security and Medicare taxes in Boxes 3 and 5, respectively. The entry in Box 12 with Code C serves primarily as an informational detail for the taxpayer and the IRS. When filing your tax return, you generally do not need to perform any additional calculations or separately report this specific amount. The information provided on your W2 form, including the amount associated with Code C, is typically all that is needed to accurately complete your tax return.